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Bear of the Day: Apache (APA)

Oil has been struggling as of late, and the energy sector has easily been the worst performing major market segment to start 2017. This is despite some recent news that was actually pretty positive for the space, as we saw a rather large drawdown in the EIA report this past week.

However, shale production in the U.S. remains high, and global supplies of oil are surging, led by rising Libyan output and the unlikely prospect of Russia agreeing to further OPEC-led cuts. So, in this type of environment, oil has a hard time breaking out higher, even on what would otherwise be solid news.

As you might expect, this situation is pretty poor for energy-focused stocks, as the sector currently occupies the bottom of the sector rank list. And in terms of weak industries, the exploration space is especially troubled, and has a bottom 25% industry rank to reflect that standing too. Due to this, it is probably a good idea to avoid Apache ((APA - Free Report) ) in this environment, and that is especially the case if we look to earnings estimate revisions for this company too.

APA Estimates

Thanks to the rough energy situation, exploration and production companies like Apache are in a rough spot. Sure, earnings are expected to grow when compared to the even more horrid environment of last year, but things aren’t looking as impressive as they used to for this company.

In fact, over the past sixty days, we have seen five estimates go lower for the current quarter earnings compared to just one higher, while we have seen a similar trend for the current year, as eight estimates have gone lower compared to just two higher.

The magnitude of these estimate cuts has also been pretty intense, as the consensus has fallen from 20 cents a share sixty days ago to just 13 cents a share today, while we have seen a slashing of the consensus from $1.18/share to $0.80/share in the same time frame for the current year.

That isn’t even the end of the bad news though, as the most accurate estimate is even lower. The most accurate estimate for the current quarter is just 11 cents per share—a 15% reduction—while the current year is at sixty cents per share, a 25% reduction from the current consensus.

Apache Corporation Price and Consensus

Clearly, things aren’t looking great for Apache on the earnings estimate revision front, and that is why it should be no surprise that the company has fallen to a Zacks Rank #5 (Strong Sell), and why we are looking for a sluggish performance from this name in the near future.

Other Choices

The oil space isn’t looking very promising right now, but if you must get exposure to this sector, you might want to look to the integrated Canadian market, as this area is currently in the top 25% from an industry rank perspective.

A name to watch here is definitely Suncor Energy ((SU - Free Report) ) as this company has a Zacks Rank #2 (Buy) right now, and it also has a ‘B’ grade for its VGM Score, suggesting decent fundamentals. So, if you are looking for a good oil choice right now, the pickings are slim, but definitely consider SU over APA at least in the near term.

Make sure to check out his podcast, the Dutram Report, which features interviews with executives from around the ETF and broader stock community. Check out the recent episode which featured the Chief Medical Officer from Kite Pharma, who spoke about the rapidly changing world of cancer research and immunotherapy in the link below!

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

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